The Power Broker

Published: August 31, 1997

(Page 3 of 4)

As the representative flinched, Luzhkov explained his ruling. ''I am an ardent supporter of the idea of a monopoly of responsibility,'' he said. ''Only then can we talk about business decisions and not losing time.'' He stood up and marched out of the rooom.

In the early 90's, the city, still trying to figure out how capitalism works, was a partner in every deal and obliged foreign investors to form joint ventures with it. Those usually ended in acrimony, threats and, in at least one case, the murder of an American businessman. Luzhkov has since loosened the rules, and a few trusted real-estate developers -- foreigners as well as Russians -- can finance and own their new or renovated buildings. But there still is a catch: the city demands that developers improve the area around their property -- renovating nearby buildings, repaving the sidewalks, putting in new gas pipes.

Luzhkov also leans on his friends in real estate for help on his pet projects. Shalva Tchigirinsky, a Georgian-born real-estate mogul who has been close to Luzhkov for years, renovated the Church of St. George as part of his multimillion- dollar deal to build a towering office building on the Moscow River next to the Kempinski hotel. He also donated $3 million toward the rebuilding of Christ the Savior Cathedral.

Of the city's $7 billion in revenues last year, the bulk -- $6 billion -- came from corporate and personal income taxes and a value-added tax. Real-estate sales and leases, according to the city's department of finances, brought in more than $300 million in 1996. In 1997, however, the city expects that its income from real estate will more than triple.

The city's biggest expense is not the construction of new housing but the $2.3 billion it spends subsidizing the old stock, which is still mostly run on socialist principles. In fact, it's the city's single biggest expense and one reason Luzhkov, like his nemesis Nemtsov, is quietly planning to reduce those subsidies over the next five years.

The outer reaches of Moscow are still crammed with giant, crumbling high-rises and potholed streets. Children and palsied pensioners beg in the subways and intersections. But the center of Moscow is one vast hammering construction site: gleaming new office buildings, restored 19th-century edifices, fancy shops and shopping malls are sprouting up like mushrooms. ''When Luzhkov first told me about his dreams for Moscow, I told him he was crazy,'' Tchigirinsky said. ''But he was right.'' He added, ''What he has done is a miracle.''

His friends say Luzhkov has grown in office, coaxing and bullying city bureaucrats to cut the massive red tape and make Moscow enticing to investors. The rules of the real estate game are still set by the Mayor, though they are clearer than they were even a year ago. But the city's renovation rides entirely on the willpower of one man. Luzhkov has yet to bring new faces to City Hall. To carry out his commands, he relies on a team of longtime Soviet apparatchiks who have adapted to capitalism without shedding Communist Party insularity or lock-step management. These officials are also suddenly sparkling with Communist-era privileges like housing, foreign trips, fancy cars and unexamined incomes.

Following a police crackdown, homicides and thefts have dropped 20 percent since the beginning of the year, according to City Hall. But the least-reported crime, corruption -- rampant throughout Russia -- is particularly blatant in Moscow, and there is little sign that anyone is doing anything about it. Businessmen, Russian and foreign, are afraid to complain. Law enforcement looks the other way. So do Russian reporters.

All city papers are subsidized by the Mayor, who confers plums like tax breaks and subsidized rents and utility bills. Even most national newspapers, beholden to the city for office space, are reluctant to provoke the man who can jack up their rents. When asked about corruption cases, Josef Galpirin, an investigative reporter at the usually irreverent, muckraking daily, Moskovsky Komsomolets, replies, ''This paper has a good relationship with the Mayor, so we don't look into those kind of things.''

To be fair, Moscow looks like a model of civic probity when compared with the Russian Government, where the inner workings are veined with favoritism and blatant abuses. Financial misdeeds occasionally come to light because the Russian ruling elite is divided into feuding factions. In Moscow, nobody messes with the Mayor. The few scandals that bubble to the surface in Moscow have a way of quickly sinking back into the ooze of collective amnesia. So it was with the sensational murder of Paul Tatum, an eccentric and somewhat louche American businessman who was tangled in an ugly, highly public fight with the city and the Radisson Hotel chain over control of the hotel's business center.

The initial outcry was fierce -- American businessmen threatened to boycott the hotel and demanded a real investigation of the crime. They also wanted Umar Dzhabrailov, the city-appointed acting manager of the joint venture and Tatum's principal antagonist, removed from his job. After a USA Today reporter sought the protection of the United States Embassy, complaining that Dzhabrailov had threatened his life during an interview about Tatum's murder, Washington took the unusual step of revoking Dzhabrailov's visa. Luzhkov not only kept Dzhabrailov in place, he rewarded him with another of his pet projects, management of the Manezh. ''If the American side has sound evidence of his involvement in this horrible murder and terrorist act, I am ready to draw the most radical conclusions -- I mean

to stop all contact with him, business or personal,'' he said gruffly, ''If not, we will take the decision on whom to deal with on our own, without any pressure or instructions from America.''